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Act 2017 Explained

IGST Act — Integrated Goods and Services Tax

The Integrated Goods and Services Tax Act 2017 governs GST on inter-state supplies and imports. Here is how IGST works, how it replaced CST, and why it simplifies trade.

Introduction

The IGST Act 2017 is the GST law that covers two situations: inter-state supplies (goods moving between states) and imports into India. Before GST, inter-state sales attracted Central Sales Tax (CST) — a separate tax that the centre collected and then distributed to states. CST was complex and led to multiple disputes.

IGST replaced CST with a simpler model. The centre collects the entire IGST amount and later transfers the destination state's share to that state. This removes the need for separate centre-state settlements and makes compliance easier for businesses operating across multiple states.

Key concepts

Inter-state supplies

When goods or services move from one state to another, IGST applies instead of CGST + SGST. The entire tax is collected by the centre as IGST and the destination state's share is later transferred to it.

Simpler administration

Under the old CST system, the centre and states each levied tax separately and settled revenues between themselves — a complex and slow process. IGST replaced this with a single tax that flows through one collection point.

Import of goods

When goods are imported into India, IGST is levied at the customs barrier, alongside customs duty. The IGST paid on imports is eligible as input tax credit for registered businesses.

IGST and input tax credit

A business can claim IGST paid on purchases as ITC and use it to set off IGST collected on sales. Unlike CGST/SGST, IGST ITC can be used to pay any IGST liability without the same-type restriction.

IGST vs CST at a glance

Feature IGST (GST era) CST (pre-GST)
Inter-state tax Single IGST at full rate CST at 2% (with declaration) or full rate
Input tax credit Full ITC allowed ITC restricted, caused cascading
Collection point Centre collects, redistributes to state Centre collected, then settled — slow and complex

Frequently asked questions

What is IGST?
IGST stands for Integrated Goods and Services Tax. It is levied on all inter-state supplies — when goods or services move from one state to another — and on all imports into India. The centre collects IGST and later transfers the destination state's share to that state.

When do I pay IGST instead of CGST + SGST?
You pay IGST when the supplier is in a different state from you. For example, if you are in Karnataka and buy from a supplier in Maharashtra, the sale is inter-state and IGST applies. If the supplier is also in Karnataka, CGST + SGST applies instead.

Is IGST more expensive than CGST + SGST?
No. The total GST rate is the same whether it is IGST or CGST + SGST. For example, an 18% GST product attracts 9% CGST + 9% SGST if bought intra-state, or 18% IGST if bought inter-state. The total tax burden is identical.

Can I claim IGST as input tax credit?
Yes. Registered businesses can claim IGST paid on purchases as ITC. IGST ITC is more flexible than CGST or SGST ITC — it can be used to pay any IGST liability, and any remaining IGST ITC can be converted to CGST or SGST ITC after six months.

How does IGST work for imports?
Imports are treated as inter-state supplies under the IGST Act. When goods arrive in India, customs duty is applied first, then IGST is applied on the customs value plus duty. The IGST paid at customs can be claimed as ITC by the importer.

Sources

Last reviewed by FinWiz24 Research Desk.